To their credit, the council members do not rely on importing drugs from Canada or elsewhere. As some have observed: we need Canadian drug prices, not Canadian drugs.

What are their recommendations, and do those recommendations make sense?

In short, the council advocates extending tried and true procedures. They advocate policies with which the drug industry has participated for many years, policies based on negotiation rather than price controls. Their proposals are bold in scope, traditional in means.

Drug prices are a public policy issue for three major reasons:

First, drug prices in America are nearly twice that of any other wealthy nation. Why? Our government is the only one that does not pursue formal price containment policies.

The second concern is profit. Drug manufacturers have, for years, topped the Forbes list as the most profitable industry. While a fair profit is reasonable, the public is being asked to bear the cost of lavish corporate salaries and extraordinary public advertising and promotional campaigns. Were drugs purchases discretionary, all might be well and good. However, it is the oldest and sickest of our citizens who bear the burden of these costs.

Finally, drug costs are the fastest-rising component of health spending. West Virginians spent 3 percent of their total income on prescription drugs in 2002, second only to Tennessee, and well above the national average of 1.87 percent. If anyone has to get a handle on the cost of drugs, it’s us.

How, then, can drug prices be contained?

Purchasers of any product can induce manufacturers to lower prices through incentives and/or disincentives. These measures must target either of two pressure points: sales volume and/or market share. The greater the purchasers’ ability to control market share, the better the deal they can cut with the manufacturer. The greater the volume of sales one can deliver, the greater the discount one can command.

Such practices are neither new nor controversial. They are common practice throughout the drug industry. Drug purchasers simply apply their own economic leverage to parry that of the drug manufacturers.

These principles have been a key element of Medicaid programs for over a decade. They are a mainstay of private-sector insurance programs and have been recognized by the National Governors Association’s Center for Best Practices.

With these principles in mind, the council has proposed a number of tools for increasing negotiating leverage.

It suggests consolidating drug purchases by all state agencies within the Office of a Pharmaceutical Advocate modeled after the very successful Illinois Office of Special Advocate for Prescription Drugs. Pooling Medicaid and Public Employees Insurance Agency purchases alone would achieve a buying pool covering over half of all West Virginians with health insurance, increasing both control of market share and volume.

In the future, the state buying pool might be open to private insurers and employers, especially small business. Individuals who do not have other access to discount drugs — whether insured or uninsured — might also be invited to participate through a drug discount card, sort of a next-generation Golden Mountaineer card for all West Virginians, not just seniors.

Finally, the state employee insurance plan currently participates in RXIS, the oldest multi-state pool for negotiating prescription drug discounts — another of the National Governors Association’s Best Practices. The council proposes expanding existing multi-state purchasing arrangements with other states.

One additional step is necessary if the state is to influence market share. Drug purchasers traditionally direct patients to those drugs that are most cost-effective, a practice that has been credited with greatly reducing the cost to patients.

Patients are not denied other drugs, but they must obtain special permission beforehand — prior authorization. Drug companies commonly offer rebates to achieve preferred listing status.

The council has proposed development of a common preferred drug list and prior authorization procedure for the consolidated buying pool. A single list would both streamline the administrative processes and increase the ability to leverage discounts through additional ability to influence market share.

So much for implementation. What of the selection of a pricing schedule?

Here, the council selected the Federal Supply Schedule, a price list freely negotiated by the manufacturers with the Office of Veteran Affairs for VA hospitals, the Public Health Service, and other federal agencies. Its prices are, on average, 42 percent below retail.

The federal prices would not be imposed on drug manufacturers. They would simply serve as a benchmark for negotiations. The council estimates a potential savings of $19 million per year by the Public Employees Insurance Agency for just its top 25 drugs — a 34 percent savings.

After months of evaluating options, the Cost Management Council has made its recommendations to the Legislature. Many other states are now watching what West Virginia will do.

But that is not the reason to act and act decisively. We should act because action is needed. And it is needed now.

Kurland is a Charleston artist and health action coordinator for Covenant House.

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